Singapore as the Most Expensive Market
Singapore will overtake Hong Kong as the most expensive real estate market in the Asia-Pacific region in 2023. According to the Urban Land Institute’s 2023 APAC Home Attainability Index, the median price of a home in Singapore will be $1.2 million, surpassing Hong Kong’s median price of $1.16 million. This shift in the rankings is significant given Hong Kong’s previous dominance in terms of property prices.
Factors Driving Singapore’s Real Estate Market
Several factors contribute to the robustness of Singapore’s real estate market and its appeal to buyers and investors. A key driver is the large influx of immigrants, along with the trend of young professionals moving out of multi-generational family homes. These demographic shifts have created a strong demand for housing, leading to price increases and growth in the rental market.
In addition, Singapore’s government-built Housing and Development Board (HDB) flats have made home ownership more affordable for residents. These flats have a median price that is only 4.7 times the median household income, providing a relatively accessible option for Singaporeans looking to become homeowners. This affordability factor sets Singapore apart from other major cities in the Asia-Pacific region, where median home prices are significantly higher relative to median household incomes.
Rental Market and Affordability
In addition to high property prices, Singapore’s rental market is one of the most expensive in the Asia-Pacific region. Monthly rents for private apartments in the central region of the city-state can reach $2,598. With a median rental price of $1,958, Sydney houses come in second place, behind $1,732 for Sydney apartments. Hong Kong ranks fourth with a median rent of $1,686.
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Despite high rental prices, the affordability of rents in Singapore is relatively better compared to the affordability of home ownership. Monthly rents in most cities in Asia and the Pacific are less than 30% of median household income. Notably, cities in Japan and South Korea have the lowest ratio of monthly rent to income, providing more affordable rental options for residents.
Government Measures and Market Resilience
The Singapore government has taken several measures to curb rising property prices and address affordability concerns. For example, stamp duty for foreigners was doubled to 60% in April 2023. Despite these measures, the market has remained resilient, with prices experiencing only a marginal decline of 0.2% in the second quarter of 2023. Unlike other countries where high interest rates have led to property price crashes, Singapore’s property market has shown remarkable stability. Private home prices will increase by 10.6% in 2021, then by 8.6% in 2022.
Capital Markets: Opportunities Amidst Challenges
Despite investor caution amid economic challenges, Singapore seems to remain a prime investment destination in 2023. With its pro-business policies, clear legal system, and robust infrastructure, it’s an enticing place for real estate investment, and the capital market is expected to see increased activity as investors adjust their portfolios to rising interest rates. Office, industrial, and hospitality are attractive due to rental rates and supply. However, residential interest may wane due to cooling measures and high prices.
